Inventory is the backbone of your restaurant.
What’s more: your food inventory plan keeps everything in place, organized, and connected – and one tiny oversight can result in a drastic change for your business.
In some restaurants, up to 10% of food is wasted before hitting a plate – meaning 10% of your revenue may not be realized under your current inventory system.
How can you not let that happen in your restaurant? Let's start with restaurant inventory management 101: What it is, why it is important, and some quick tips to help you easily track inventory in your restaurant.
What Is Food Inventory Management?
Restaurant food inventory tracking is both a loss prevention tool and a measure of profitability for your restaurant.
Why is it important to track your restaurant’s inventory? Because if you don't know what you're losing, you don't know what you could be earning.
Inventory tracking means knowing exactly:
what supplies come into your restaurant,
what goes out of your kitchen, and
what's leftover in the back of the house.
Without knowing these exact numbers, you won't be able to understand where your supply (and money) is going.
It's one thing to notice that your recent shipment of cheese depleted quite quickly, for example. But it's another thing to know exactly why.
Was it all sold to satisfied customers? If so, great! You should easily be able to attribute every ounce to a price point.
But before you buy a round for the house, did you take into account these possible areas of loss?
Remedying customer complaints
Accidents happen, customers complain, and not every ounce of food makes it onto a plate. These losses aren’t catastrophic: they are inevitabilities within the restaurant world. But they are areas of loss, affecting both inventory control and profit for your business.
And it’s important to track those areas because not knowing what supplies have been wasted — for whatever reason — means you don't know exactly how much inventory has been unused. And that means you can’t reliably calculate your true earnings for a shift, day, week, month, or year.
How Do You Manage Inventory in a Restaurant Kitchen? 10 Tips & Best Practices
So what can you easily do to manage your inventory?
Here are 10 tips and best practices to start you off on the right management path.
1. Learn the terminology
The amount of product (or dollars worth of product) in-house. Depending on your business, you should refer to sitting inventory as either dollars worth or physical amount. The important thing is to consistently use only one unit of measure.
The amount of product (or dollars worth of product) used in a set period of time. You might base your depletion on daily, weekly, or monthly sales; it’s easily calculated using the sales reporting data from your POS.
The amount (or dollars worth) of sitting inventory divided by the average depletion in a set period. Here's the formula:
Sitting Inventory ÷ Average Depletion (during a given time frame) = Usage
For example, if you have four gallons of mayo and you plan to use one gallon a week, you have four weeks of usage.
The difference between your product cost and the usage amount cost.
Let's say your inventory is down $100 worth of chicken at the end of the day, but your POS says you only sold $95 worth of your signature chicken piccata. This makes your food cost variance equal to $5 — in other words, $5 worth of chicken is unaccounted for.
Variance can also be a percentage to help you compare more easily. In this scenario, the $5 variance/$100 (the usage amount cost) = -5% variance.
2. Choose your system
Automated Inventory Management
The most accurate way to track inventory is to manage it through your restaurant POS system. Inventory management software tracks your restaurant's actual usage, taking the guesswork out of their usage for a more accurate picture of how inventory moves through the restaurant.
Pros: It's the most accurate way of tracking inventory in a restaurant.
Cons: It's not available on all POS platforms. In case, very few POS systems have integrated inventory management, so make sure your restaurant point of sale platform has this capability.
Par Inventory Sheets
A par inventory sheet is a tool used to manage inventory by food type and/or food supplier. It allows owners and managers to set levels of how much of a certain item they want in house. This number is also known as a “par level.”
When it comes time for their next inventory order, managers use their restaurant's par inventory sheet to guide what and how much they should be ordering based on their sitting inventory, how fast previous inventory moved through the restaurant, and any upcoming events they think may call for additional inventory.
Pros: It's intuitive and just requires simple math and forecasting to come to your inventory orders.
Cons: Cost and variance are not taken into consideration – only usage is. Because of this, over-portioning and theft can easily go undetected if not compared to actual variance.
3. Organize your space
Organization is key to getting started with inventory tracking and management. Labels are crucial here — all food in containers should be dated and labelled, no matter what. And organizing the walk-in and dry storage so that different types of food have their own designated areas sets you up for success.
This ensures that you’re using your space efficiently, storing ingredients properly, and able to identify what you need when you need it.
Additionally, as you’re getting started each day, you can easily get rid of any expired foods or items that are no longer usable for your menu.
4. Train your staff (yes, ALL of them)
Inventory management cannot fall entirely on one person. Managers and shift leaders should be delivering detailed inventory reports whenever they clock out and alerting the team of any major outages or issues.
This responsibility also falls on your line cooks and back-of-house staff who should be making notes of spillage, errors, and rotten food throughout their shifts. Training your staff to become inventory experts or dedicated mathematicians might be a tall order. But it's easier if you incorporate an easy-to-use inventory system for your employees.
Training Manual Template
Use this restaurant training manual template, a customizable Word Doc, to provide your staff with the rules, guidelines, and clarity they need to do their jobs efficiently.
5. Accommodate seasonal items
Keep in mind what's seasonal in your restaurant and plan ahead accordingly.
For example, if your peppermint hot chocolate doesn’t tend to move post-holidays, your inventory tracking will tell you how long to leave it on the menu. You should be able to easily see when it's losing luster for your customers day-by-day, and you’ll avoid taking it off your menu too soon or too late.
6. FIFO all items
FIFO = first in, first out. In other words, the items you receive first should be used first.
This might sound intuitive. But when your kitchen receives deliveries, it can be easy to put your newest shipment right at the front of the stack, especially if the person unloading the shipment hasn't been properly trained.
What you really want to do is move your entire stock to the front, and leave room at the back for the new delivery. New deliveries are also a great opportunity to check expiration dates and get rid of any items that have gone bad.
7. Track your daily sales reports
Sales directly dictate inventory, of course. So it’s important to keep a daily handle on sales specifically for inventory purposes.
Even if you can afford only a daily five-minute review of your metrics (though these check-ins should amount to a bigger, weekly deep dive), the best practice is to track restaurant sales every day.
When you check sales daily instead of weekly, bi-weekly, or monthly, you'll be able to track and respond to minute-by-minute changes in your restaurant, allowing you to make timely adjustments to your restaurant's inventory planning and your provision deliveries.
8. Invest in the right technology
Sales tracking and data analysis can be a huge task if you don't have the right technology.
Instead of computing everything yourself by hand from an inventory spreadsheet or — worse — guessing, make sure you can access data right from your point of sale system. This way, you can pick up on variances and try to figure out the source of loss.
9. Keep (just enough) extra inventory in stock
Think about this: you’re running a sandwich shop, and a huge snowstorm takes out the power across the state. Because of this, your bread supplier isn't able to deliver your sub rolls for the day, and your cheese supplier isn’t able to deliver the cheddar slices necessary for your most popular sandwiches.
That day, you have to tell all of your customers looking for a sandwich that you are out of these key ingredients and can’t make any of the most popular items.
This might not happen if you were carrying "just in case" inventory: an extra supply of inventory that tends to go fast. Of course, be sure to switch out this just-in-case inventory regularly so that it doesn’t expire.
10. Be consistent
In inventory management, as in the restaurant business in general, consistency is key. Don’t let yourself fall behind with inventory management. Proactive management allows you to stay on top of your inventory — and not wait until the last minute to replenish a product.
Developing a regular schedule and habit will make your inventory process easier in the long run. And over time, it’ll make your establishment — and you — far more profitable.
When the shutdowns started, the Herb & Beet team didn’t falter on their mission. Instead, they found creative ways to keep their community fed, employees working, and revenue coming in.
How often do restaurants do inventory?
This depends on how often you have deliveries in your restaurant. Most restaurants do inventory check-ins 1 - 2 times per week, but it makes sense to take count of your inventory every time you’re restocking, to make sure that everything is fresh and within its expiration dates.
How is food cost calculated?
Food cost percentage is calculated by taking the cost of goods sold and dividing that by the revenue or sales generated from that finished dish. Learn more about calculating food cost percentages here.
How much food inventory should a restaurant carry?
You only need to have enough inventory to cover your sales, plus a little bit extra in case of an emergency. For most restaurants, this usually means about 5 - 7 days worth of inventory, if you’re getting 1 - 2 deliveries per week.
What is a good inventory to sales ratio?
A good inventory to sales ratio is between 4 and 8, which means selling your entire food inventory between 4 and 8 times each month.
What is the average inventory turnover ratio for restaurant food?
The inventory turnover ratio indicates the number of times the store sold out its inventory in a given time period. A low inventory turnover ratio indicates either low sales or too much inventory in stock, while a high inventory turnover ratio indicates either strong sales or a poor inventory purchasing plan. The restaurant industry average is about 5.